The United States is facing daunting prospects in the Asia-Pacific
region, a huge market for US goods, while China’s influence is
growing as it makes rapid trade inroads in the region. The implications
for the US and its need to redefine its ties with Asean
are explored in our exclusive interviews with Ernest Z. Bower,
Senior Adviser & Director - Southeast Asia Program, Center for
Strategic and International Studies, Founding Partner, Brooks
Bower Asia LLC and former President of the US-Asean Business
Council, and Demetrios Marantis, Deputy United States Trade
Representative for Asia.

Q: What is “Austrian Next Generation
strategy”? How would it help expand
your market share in Europe, or elsewhere?

A: First of all we have to create a profit
creating business unit. The money we are
going to earn cannot be earned in the inter-
European market but as a network carrier
you always have to make your money out
of long haul and mid haul flights. The long
haul flights have been in the negative for
us.

We now have to search for the reasons
and to create the network of profit-creating
business units. The reasons, we have found
and the answers, we have identified. First
we are going to have a network redesign
starting from the winter schedule 2010-
2011. Then we will re-enter the market with
big aircraft.

Q: How does the relationship
between Austrian Airlines and
Deutsche Lufthansa work in terms of
creating growth?

A: Maybe you will need to ask Lufthansa
about why they have bought Austrian
Airlines. I think the major issue is the
marketing and the strategic local position
of the two countries within the CEE
(Center Eastern Europe). Countries like
Ukraine, Romania and Bulgaria are perfect.

The Austrian economy has a very strong
linkage, a better linkage even than the German
economy, to those countries, so there
is a high local demand out of Austria into
these countries, which enables us to work
as a pioneer in taking this opportunity to
develop smaller markets.

Secondly, our linkage to the Middle
East is very strong. For example Lufthansa
doesn’t fly to Syria or Damascus. There are
some destinations we are not serving of
course, for example if you look at Tel Aviv,
Lufthansa is flying a jumbo and we’re flying
a 767.

But markets like Syria and Oman are
very important for us. In total we have a lot
of debts in our company. We are suffering
with red numbers, not only now but when
the economy was good as well. We have
been in the red since 2008. The reason is
because our business model got into a little
bit of trouble, and secondly we had a lot
of external factors that explain more than
three quarters of the red numbers. We had
a lot of aircraft repairs.

These for example cost hundreds of
millions each year. We started our construction
in December 2008. In 2009, we
increased it and in 2010 there will come a time when a lot of people will leave our
company and that will create a lot of layoffs.

The growth of Lufthansa gives
us other opportunities. To give you an
example, fuel management will be done
out of Germany, not only for us but for the
other subsidiary airlines like Swiss Airlines
as well – this will give us an economy of
scale so we can bargain on a bigger scale.

Of course we are taking this opportunity
everywhere. Besides this, we are working
on our business model in our airline, therefore
we prepared a name - the Austrian
Next Generation.

Q: What does it mean for the Austrian
to have Deutsche Lufthansa as its controlling
shareholder?

A: It’s a great opportunity for a small
airline like us, otherwise you could say
our airlines will never be competitive if we
don’t get an economy of scale similar to the
big airlines. Secondly, we get access to the
customised warehouse of Lufthansa and
we become a part of the agency contracts
which is done for all the airlines. By joining
with Lufthansa we have access, where
Lufthansa used to transfer passengers to
other airlines now we are also involved.

Therefore, it is much better and much
more flexible. For example, people can fly
to Bangkok and back to Vienna which was
not possible in the past. So we offer more
value to our customers. ....